Investors Think It’s Time To Be Very Conservative In The Stock Market, CNBC Poll Says

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Wall Street investors believe it’s time to take some risk as concerns continue to mount this month, according to a new CNBC Delivering Alpha survey.

We surveyed around 400 investment managers, equity strategists, portfolio managers and CNBC contributors who are managing money on their market position for the remainder of 2021 and next year. The survey was carried out this week.

More than three-quarters of those surveyed said now is the time to be extra careful in the stock market when asked what kind of market risk they are willing to accept for themselves and their clients.

A confluence of uncertainties has arisen in the market, threatening to derail the record rally in equities. On Monday, the S&P 500 suffered its worst selloff since May as investors worried about the troubling Chinese real estate sector and the Federal Reserve’s likely pullback from its massive stimulus measures. Meanwhile, fears of slowing economic growth amid high inflation – known as stagflation – have also receded nearly two years since the start of the pandemic.

While keeping a more cautious view of the market at this time, investors still believe that stocks could climb over the next 12 months. About half of those polled said the S&P 500 would rise more than 5% over the next 12 months. Forty-four percent said the equity benchmark would be fairly stable, while only 5% said it would drop over the next year.

After this week’s pullback, the S&P 500 is about 4.2% off its early September record. The benchmark is still up about 16% this year after eight straight months of gains. Many believe the market is experiencing seasonal weakness during a historically turbulent September.

“There appears to be a shift in market sentiment over the past two weeks that favors bears,” said Brian Price, head of investment management at Commonwealth Financial Network. “After a relatively calm summer where the path of least resistance for equities was steadily higher, it looks like market players are looking to moderate this year’s rally.”

Some notable strategists are sticking to their bullish calls in the market. Widely followed Tom Lee of Fundstrat believes the stock market rout on Monday is a buying opportunity for investors. JPMorgan’s quantitative guru Marko Kolanovic also called the sale excessive.

However, Morgan Stanley’s Mike Wilson, one of Wall Street’s biggest bears, sees a “destructive” scenario in which the S&P 500 experiences a 20% correction as some economic indicators have started to deteriorate.

For yield-oriented investors, the best strategy today is private credit, according to the survey results. Only 2% of respondents think that treasury bills could offer attractive income.

Government bonds are fast becoming one of the most hated asset classes as their safe haven appeal has faded amid the economic recovery. Meanwhile, the Fed, which bought $ 120 billion worth of treasury bills and mortgage-backed securities as part of its quantitative easing program, may soon embark on its downsizing process.

Former bond king Bill Gross recently dumped Treasuries in the trash, saying the 10-year yield would trade around 2% over the next 12 months. Leon Cooperman said last week that the bonds were “totally overvalued”, calling for prices to drop sharply.